Lessons from the Post-Communist Transition (original) (raw)
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Inequality, democracy and taxation: Lessons from the post-communist transition
Europe-asia Studies, 2008
Using data for the period 1989 -2002, we examine the determinants of income inequality in postcommunist economies. We find a strong positive association between equality and tax collection but note that this relationship is significantly stronger under authoritarian regimes than under democracies. We also discover that countries introducing sustainable democratic institutions early are characterised by lower inequality. We also confirm that education fosters equality and find that larger countries are prone to higher levels of inequality.
Economic Freedom and Income Inequality: Does Political Regime Matter?
Economies
There is a growing literature studying the effects of economic freedom and democracy on income inequality; nevertheless, the inequality-effects of both factors are apparently studied separately. This paper revisits the income inequality-economic freedom nexus and uncovers the role of political regime in explaining the relationship. Using the latest inequality data from Standardized World Income Inequality (SWIID) version 5.0 for a sample of countries up to 115 over 1970-2014 period, and via dynamic panel GMM estimation method, an inequality model that explicitly captures the interaction effect of economic freedom and democracy is estimated. The findings demonstrate that economic freedom has positive effect on income inequality. The estimated size of inequality-increasing effects of economic freedom is substantial, ranging between 0.3% and 0.5% per annum. Nevertheless, the findings show that the freedom-induced inequality is attenuated in the presence of a democratic regime in the countries under study. Furthermore, freedom of international trade and market deregulation are shown to be the two most consistently significant liberalization policies across the baseline estimations and various sensitivity tests. The paper is concluded with some policy implications.
Economic freedom and income inequality : Does political regime matter ? Economies
2017
There is a growing literature studying the effects of economic freedom and democracy on income inequality; nevertheless, the inequality-effects of both factors are apparently studied separately. This paper revisits the income inequality-economic freedom nexus and uncovers the role of political regime in explaining the relationship. Using the latest inequality data from Standardized World Income Inequality (SWIID) version 5.0 for a sample of countries up to 115 over 1970–2014 period, and via dynamic panel GMM estimation method, an inequality model that explicitly captures the interaction effect of economic freedom and democracy is estimated. The findings demonstrate that economic freedom has positive effect on income inequality. The estimated size of inequality-increasing effects of economic freedom is substantial, ranging between 0.3% and 0.5% per annum. Nevertheless, the findings show that the freedom-induced inequality is attenuated in the presence of a democratic regime in the co...
Political institutions and income (re-)distribution: evidence from developed economies
Public Choice, 2014
We discuss the effect of formal political institutions (electoral systems, fiscal decentralization, presidential and parliamentary regimes) on the extent and direction of income (re-) distribution. Empirical evidence is presented for a large sample of 70 economies and a panel of 13 OECD countries between 1981 and 1998. The evidence indicates that presidential regimes are associated with a less equal distribution of disposable incomes, while electoral systems have no significant effects. Fiscal competition is associated with less income redistribution and a less equal distribution of disposable incomes, but also with a more equal primary income distribution. Our evidence also is in line with earlier empirical contributions that find a positive relationship between trade openness and equality in primary and disposable incomes, as well as the overall redistributive effort.
The Korean Journal of International Studies, 2016
How have the advanced democracies reacted to increase in income inequality? How has each country's government counterbalanced to the increase in income loss and increasing risk due to rising income inequality? This paper explores the trend and patterns of income inequality in advanced democracies. Advanced democracies show a common trend of dramatic increases in income inequality since the 1980s. Cross-national differences in household income inequality persist, however. Moreover, the extent to which the government makes an effort to compensate and redistribute varies across countries greatly. Our analysis is a direct extension of Kenworthy and Pontusson (2005), but we go beyond what Kenworthy and Pontusson have shown in their analysis by analyzing the updated data that spans up until the year 2010. The use of the updated data allows us to examine the patterns of inequality and redistribution since the 2000s. This paper also examines the relationship between inequality, redistribution and social spending, utilizing the comparative political economy literature such as the Meltzer-Richard model, 'paradox of redistribution,' government partisanship, electoral systems, 'varieties of capitalism' and welfare state regime theory. This exploratory analysis suggests interesting patterns of inequality and redistribution and sheds some light on the political economy of inequality and redistribution in advanced democracies.
The Nexus of Political Inequality and Economic Inequality in Established Democracies
It is widely accepted that citizens are not politically equal in economically unequal societies, and that political inequality in turn has a detrimental effect on the distributive process. However, there has been a lack of empirical evidence about this relationship largely because measures of political inequality are not well developed. To explore the puzzle, this article first constructs the Political Inequality Index (PII) that is composed of two dimensions: political participation and representation, which reflect the equality of political voice. The index builds on a middle-range approach that excludes both equality of voting and equality of political outcomes and covers 69 democracies over the period between 1990 and 2012. This inquiry then investigates the reciprocal relationship between political inequality and two distributive stages (market inequality and redistribution), using both the OLS and 2SLS estimation. Overall, the results do not support that there is significant endogenous effects between political inequality and economic inequality, while controlling for a host of economic, social, and political factors, although there exists some evidence of correlation.
Civil Society Democracy and Income Inequality Evidences from 125 Countries 1980-
Although civil society may contain the opposite voice for income redistribution, it happens only when a country experienced democratic transition with active civil society participation. We used panel data from 125 countries between 1992 and 2015 to demonstrate the relationship among civil society, democracy and income inequality measured by Gini coefficient. The result of this article indicates the counterfactual regime transition effect and vigorous civil society are critical to inequality. The coefficient of Civil society organizations(CSO) consultation in fixed effect model points out that civil society through Democratic political process is negatively relevant to increasing of inequality. Citizens may organize to against tax increasing and redistribution policies. Yet, from our results, it is pointed out that the effect of civil society through the political process to promote redistribution is more obvious. And democracy is a prerequisite for such a civil society to rely on.
Democracy and Income Inequality: Searching for a Reciprocal Causal Relation
Ph.D Thesis, 2019
The study of the relation between democracy and income inequality is puzzling scholars at least since the 1970s, however, there is still no agreement about how the relation between the two variables would shape nor how the causal mechanisms would work, and some scholars even denied the presence of any causal relation. The aim of the present work is to shed light on such a disagreement by addressing the relation between the two variables from a political science rather than a purely economic viewpoint, developing a more complete theoretical framework abandoning some of the economic premises mostly employed insofar. In particular, the work aimed to answer the following main research questions: does, and through which channels, the state’s regime influences its levels of inequality? Does, and through which channels, inequality influence a state’s regime? Is there a reciprocal rather than unidirectional causal relation between the two variables? Through the employment of a mixed inductive/deductive approach, the present work firstly analyses the theoretical and empirical literature on the subject. Secondly, based on the literature and on the most established theories, it presents some speculations about the functioning and the mechanisms underlying the relation between the two variables. Thirdly, to refine the theory, and to assess the presence of variables and sub-mechanisms interfering with the principal relations, it carries out the study of three peculiar cases that deviates from the established theories and from the speculations. Fourthly, using the insights provided by the case studies, it elaborates a refined theoretical framework capable to explain the relation between the two variables. Lastly, from the theoretical framework, it elaborates several hypotheses and tested them employing different econometric approaches. With respect to the two main variables, the quantitative analysis employed data on Gini from the Standardized World Income Inequality Dataset, and data on the quality of democracy respectively from the Unified Democracy Scores Dataset, the Polity IV Dataset and the Global States of Democracy Dataset. The estimates performed revealed some interesting results. First the estimates confirm that the quality of regime significantly reduce inequality, but only after a certain level of regime quality following the pattern of a political Kuznets curve, and that at the same time inequality negatively and significantly influences the quality of government. Second, they also confirmed the presence of a reciprocal causal relation between the two variables. In addition, the estimate confirmed that other variables and mechanisms concur in shaping the relation between the two main variables. In particular, education and the presence of a leftist government have a negative effect on inequality, corruption and the adherence to the economic neo-liberalism do increase countries’ levels of inequality, protests increase the quality of the regime, and that repression, on the contrary, does not have any significant effect on the quality of the regime. Third, the estimates also confirmed that citizens’ attitude toward inequality and redistribution and citizens’ perceptions on social mobility do influence countries’ levels of inequality. Lastly, the analysis of the effects of the different attributes of democracy on inequality and vice versa, through the employment of the Global state of Democracy indices, highlights that only some attributes of democratic quality significantly influence inequality while only some attributes are significantly influenced by inequality.
Dictatorships (actually) redistribute more
2015
This paper seeks to examine the effect of political regimes on actual fiscal redistribution. We first use a simplified theoretical framework which allows us to formalize the testable implications of the relevant literature. Subsequently, employing data on Gini coefficients before and after taxes and transfers we develop a measure of fiscal redistribution which allows us to capture the targeting of government transfers. Then, our empirical analysis examines the impact of the political regime on realized fiscal redistribution for a panel of 133 developed and developing countries between 1960 and 2010. Our results suggest that dictatorial regimes redistribute more than democracies through fiscal policies. Moreover, our analysis suggests that the positive impact of the dictatorial regime on fiscal redistribution is mitigating after some years of regime’s stability and finally becomes negative. Our empirical findings remain robust across several different specifications and estimation te...